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(Dis)Balanced Funds?

Research Digest | March 13, 2019

2019 witnessed outflows from balanced funds to the tune of 2029 crores in just 2 months

Balanced funds have been rather unsuccessful in beating the benchmark returns over the last 1 year. These funds unlike other equity oriented funds have seen the most investments in the dividend option rather than in the growth option. Total inflows into balanced funds in FY18 had been Rs 89757 crores while FY19 till February has seen net inflows in balanced funds to the tune of only Rs 10046 crores. The fall in the inflow in this category can be attributed to the depreciating dividend flow and low to negative returns in the category over the last 1 year. Balanced funds recently have been used by the investors as a tool for avoiding high risks and to earn regular dividends contrary to the fund’s investment objective. These funds carry more than 65% of their AUM in equity and are hence depend on the market for return generation.

2018 has not been a great year for global equity market and the slowdown in the Indian market has not helped to the cause of these funds. The returns generated by the parent funds have been sublime in the past 1 year. When we compare the top 4 funds return over a period of 1 year: HDFC balanced and Aditya Birla Sun Life balanced fund have returned -5.8% and -1.2% respectively while ICICI balanced and Axis Dynamic balanced fund have returned 0.95% and 1% respectively. Dividend payout records of most of the balanced schemes have been below par in the last year. The amount of dividend paid has been diminishing over the time.

The last four years have not witnessed any negative outflows from balanced funds but the year 2019 has been an exception when people have started redeeming their investments in balanced funds courtesy of the below par returns generated by them.


Balanced funds have been the most reliable investment option for the risk averse investors as it helps the investors to have an equity exposure without taking much risk. Balanced funds have been mostly used by the investors as a dividend paying instrument contrary to its investment objective. The below par returns in the previous year with depreciating dividends have forced people to switch money from these schemes to sole debt or solely equity scheme.

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